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March 25, 2013

Bye-Bye BRICs, Hello TIMPs

As growth slows in some corners of the globe, it picks up in others, one investment expert says

It’s no secret that growth rates have, at times, slowed in recent years in China. The same is true of other once-high-flyers in the well-known BRICs group—India, Russia and Brazil.

That trend has prompted at least one investment firm to turn its focus from these nations to another group, which it’s calling the TIMPs: Turkey, Indonesia, Mexico and the Philippines.

While the BRICs are “still in position to be among the leaders in global growth in the years ahead,” the TIMPs could become the next generation to watch, says Bob Turner, chairman and chief investment officer of Turner Investments, which has about $10 billion in assets under management. Some investors, Turner points out, have turned on the BRICs “like bicycle-racing fans repudiating Lance Armstrong.”

“Their economic performance since 2000 has been on balance superior but also something of a disappointment, impaired by imbalanced economies, political corruption and poor demographics,” wrote Turner in a quarterly report released Friday.

“We believe other emerging nations are poised to challenge the BRICs over the next 30 years—and in the process inspire an acronym denoting their status as a new engine of global economic growth,” he added.

What’s so hot about the TIMPs?

Turkey, for instance, has been labeled the “Hottoman Empire” for its recent stretches of robust economic growth, positive working-age demographics, strong tourism and productive auto industry;

Indonesia is seeing private consumption rise along with its expanding middle class;

Mexico, once again a manufacturing hotspot, has a new president who is looking to open up a strong energy sector to investment; and

The Philippines continues to benefit from growth tied to call centers and money inflows from citizens working abroad.

On a combined basis, the BRICs’ economy grew nearly 10% in 2007. However, growth slowed to 6.3% from 2011 to 2012.

In the past two years the MSCI BRIC Index has declined a cumulative 12.62%.

In the case of Turkey, it’s growth was a sizzling 9.2% in 2010 and an 8.5% in 2011. It is looking at growth rates of 3% to 4% for 2012 and 2013, however.

For its part, Mexico has surpassed Brazil in GDP growth, with gains of 3.9% in the past two years. In addition, Goldman Sachs predicts the nation will be the world’s fifth-largest economy by 2050.

Like Turkey, it has an excellent location to take advantage of shifting patterns in global trade. International trade contributes 60% of Mexico’s GDP, Turner says.

The Philippines benefits from low inflation (about 3%) and high GDP growth (about 6%). “We think that pattern should remain in place for the next three years,” the investment expert explained.

Offshore call centers located there brought in about $11 billion in revenue in 2011, and the Filipino government hopes to raise that figure to $25 billion by 2016. (Last year, the Philippines lured 70,000 call-center jobs formerly based in India.)

Still, despite some short-term challenges, the BRICs “should remain critical to global growth for a long time to come,” Turner notes. “But we firmly believe … the TIMPs should fulfill their own potential as rising economic juggernauts.”